What Are Assets in Accounting? Types & Examples

Assets are resources that you own, control, and expect to provide a future economic benefit. For example, cash is an asset because it can be used to pay for future expenses. Other common assets are equipment, buildings, and investments.

Assets are classified based on three criteria:

1. Current vs noncurrent: An asset can be classified based on how soon it can be converted to cash or its economic benefit realized.
2. Tangible vs intangible: An asset is classified based on its physical existence.
3. Operating vs nonoperating: An asset is classified based on whether it’s used in the core operations of the business.

Examples of Common Assets Classified by 3 Criteria

As shown in the table below, every asset can be classified based on three criteria, such as cash is a current, tangible, operating asset. Following the table, we provide more detail about how to classify assets for each criterion.

What Are Current vs Noncurrent Assets?

Current assets are highly liquid assets that can be sold quickly or otherwise converted into currency (typically within a year), whereas noncurrent assets may take greater than a year to convert to cash or recognize their economic benefit, such as how fixed assets will provide future economic benefits over a period of more than one year. They cannot be used to produce immediate cash flow and, therefore, aren’t part of a company’s net working capital.

Examples of Current Assets

• Cash and cash equivalents: Cash and cash equivalents are the most liquid of all assets. Cash requires no conversion and is spendable as is, whereas cash equivalents are any type of liquid securities that aren’t currently in the form of cash but can be converted instantly.
• Equity investments: Equity investments can be sold for cash and are thus considered current assets.
• Short-term bond investments: Bonds, such as United States Treasury Bills, will be converted to cash on their maturity date. Therefore, bonds with a maturity date within one year are current assets.
• A/R: Accounts receivable represents outstanding invoice balances from customers resulting from the sale of products or services and are expected to be collected quickly.
• Inventory: Inventory is a current asset because it’s expected that the company will sell the inventory within one year.
• Prepaid expenses: While prepaid expenses can’t be converted to cash, their benefit will be realized in the near future and are therefore current assets. Learn more about prepaid expenses.
• Supplies: Supplies are items expected to be used up within one year. Learn more about supplies.

Examples of Noncurrent Assets

• Fixed assets like equipment, machinery, furniture, vehicles, and real estate: Fixed assets are intended to be used within the business and aren’t held for resale. Since the economic benefit of fixed assets will be realized over the life of the asset, they’re noncurrent assets.
• Long-term bond investments: These types of investments won’t be collected within a year, making them noncurrent assets.
• Vacant land: Land held for investment is a noncurrent asset because it isn’t converted to cash easily. However, if you buy and sell land frequently, vacant land can be inventory, which is a current asset.
• Intellectual property rights: Intellectual property, such as copyrights, trade secrets, and industry knowledge, is considered a capital asset that will benefit a company over a long period and are, therefore, noncurrent assets.
• Brand recognition: Brand recognition remains as long as the company stays afloat, and as such is considered a noncurrent asset.
• Patents: Patents provide benefits to the company over the life of the patent and are, therefore, noncurrent assets.
• Goodwill: This includes the reputation of the company, good customer relations, a solid customer base, and the quality of the employees. Since these provide a long-term benefit, they’re considered a noncurrent asset.

What Are Tangible vs Intangible Assets?

Tangible assets are property that you can physically touch, while intangible assets are assets you control that’ll provide a future benefit but don’t exist physically, such as cannot be touched or felt.

Understanding which assets are tangible and intangible helps to assess your company’s solvency and risk.

Examples of Tangible Assets

• Cash and cash equivalents
• Fixed assets like equipment, machinery, furniture, and real estate
• Inventory
• Vacant land

Amounts owed to the company are also tangible assets because they’re expected to be converted to cash. Examples of this type of tangible asset include:

• Short-term and long-term bond investments
• A/R

Finally, any amount that represents ownership is considered a tangible asset. For instance:

• Stock owned in a corporation
• Ownership interest in a partnership or limited liability company (LLC)

Examples of Intangible Assets

• Intellectual property rights
• Brand recognition
• Patents
• Goodwill

What Are Operating vs Nonoperating Assets?

Operating assets generate revenue through day-to-day business operations and help maintain workflow, while nonoperating assets provide future benefits but aren’t part of the core everyday operations.

Determining which assets are operating and nonoperating is important in understanding the contribution of revenue from each asset and what percentage of a company’s revenues comes from its core business activities.

Examples of Operating Assets

• Cash and cash equivalents
• Fixed assets like equipment, machinery, furniture, and real estate
• A/R
• Inventory
• Intellectual property rights
• Patents
• Goodwill
• Brand recognition

Examples of Nonoperating Assets

• Short-term and long-term bond investments
• Equity investments
• Vacant land

Bottom Line

Assets are resources used to generate cash flow, reduce expenses, and provide other future economic benefits. They’re a key component of a company’s net worth and are categorized based on specific characteristics, such as when their benefit is expected to be realized, whether they physically exist, and whether they’re used in the operations of the company.